Bill aims to give homeowners the right to ask who’s taking their house

Another effort at ensuring a bank or other financial entity prove it has the right to foreclose on a property was introduced Monday at the Colorado legislature.

Among other things, Rep. Beth McCann’s bill, HB-1249, aims to give homeowners the right to demand proof at an otherwise useless hearing that the entity foreclosing on them is actually legally entitled to do so.

Called a Rule 120 hearing, the quickie court process by law only considers whether the homeowner is in the active military and is in default of their note — called a deed of trust in Colorado, but known by most as the mortgage.

The bill would also remove the ability of a lawyer to simply sign a document attesting their client, usually a bank, is the real holder of the note — without ever having to produce the paperwork.

Although bankers strongly deny that’s the case, and are adamant that every foreclosure occurs with the proper paperwork in hand, it’s all been a matter of trust. McCann says her bill gives homeowners the right to ask — and would require the district court to certify — the bank is the right one.

It all comes from banks’ creation of the Mortgage Electronic Registry System, MERS, which was their way of tracking the buying-and-selling of mortgages without ever having to record those transfers in the county recorder of deeds where the property is located.

Homeowners became confused when they signed a mortgage with Bank X but saw that Bank Y was foreclosing and never saw any transfer of paperwork between them.

Too, the state’s top foreclosure lawyers, in conjunction with the public trustees who oversee the foreclosure system, rewrote the laws to allow them simply to attest their bank had the right to foreclose — called a signature of qualified holder.

McCann’s bill would stop the practice.

Bankers aren’t happy about it, saying it would needlessly chill the secondary market on which mortgages are sold. And if a bank can’t resell the mortgages it creates, then it has less money to lend, ultimately hurting consumers.

You might recall last year when this bill made its efforts in the legislature, on the heels of Denver Post stories about the whole process and how complicit trustees and lawyers were in the deal. It died a partisan death, despite testimony from lawyers who said they regularly signed foreclosure papers on houses without ever seeing the mortgage that was the basis for it in the first place.

Then there was the grassroots effort at putting the question on the ballot — one that was gaining steam and starting to make the banking world sweat a little. The organizers eventually stopped short of the ballot, having run out of the money needed to gather the thousands of signatures necessary for it to make the November election.

So here it is again … and the same battle lines are being drawn.

While the bill does a few other important things that even the federal $25 billion settlement didn’t, the bottom line is a homeowner will have the absolute right to question who is taking their property.

And as has been said, you might be in arrears in paying your car loan, but if you see a tow truck driver hooking it up in front of your house, you’re entitled to ask: is he repossessing it, or stealing it?